News
17/12/25
Libyan oil firms bypass government to sell crude
Libyan oil firms bypass government to sell crude
London, 17 December (Argus) — Libyan upstream operators have used a special
contractual clause to sell some crude directly to international oil firms in
recent months, bypassing the central government to directly access oil revenues,
sources told Argus . Mellitah Oil & Gas, Akakus Oil, Zueitina Oil and Agoco sold
crude worth more than $380mn between March and October, under this
"proxy-payment" scheme, to Italy's Eni, Spain's Repsol, Austria's OMV and
Libya's Arkenu Oil respectively, according to sources. The mechanism is legal
under a clause in production-sharing contracts dating back to the time of former
leader Muammar Gaddafi, which allows operators to sell crude directly to cover
special funding needs, sources said. But sources and analysts say the mechanism
is opaque, lacks checks and balances and could be exploited for personal gain.
It also diverts oil revenues away from the central bank, the custodian of
Libya's oil wealth. "The proxy payments occur outside the framework of the
ministry of finance and the central bank [and] are not recorded as official
revenues or expenditures," said an official at the ministry of finance. "It is
being used as an unlawful tool for controlling oil revenues." NOC, Eni, Repsol
and Arkenu have been contacted for comment. OMV declined to comment. State-owned
NOC, which has stakes in the upstream operators, normally sells its equity crude
production to international buyers with proceeds flowing to a ministry of
finance account at the central bank in Tripoli. International oil firms with
stakes in the operators, including Eni, Repsol and OMV, are allocated equity
crude and pay royalties and taxes to the Libyan state. The crude being sold
under the proxy payment mechanism is from Libya's equity production, and is
separate from the equity crude allocated to international oil firms. The
operators are usually reliant on the state to fund their operations. But Libya's
political division, with rival governments in the east and west, has for years
prevented a unified state budget, leaving operators with irregular and
insufficient funding from the central government in Tripoli. "The mechanism was
never supposed to be used in this way," said a source with knowledge of the
matter. "You can't confirm where this money is being spent." "It's been heavily
exploited now in the absence of a budget," said another source at a private
Libyan oil firm. Libya's fragmented political framework has allowed powerful
groups varying levels of control over the economy, including in the upstream
sector. Enter Arkenu The most high-profile example of this is services firm
Arkenu Oil, which the UN has said is controlled by Saddam Haftar, a son of
east-Libya militia leader Khalifa Haftar. Arkenu has a contract with NOC
subsidiary Agoco , operator of the Sarir and Mesla oil fields, to boost output
in return for payments in crude. Industry figures and analysts question the
capacity of Arkenu to carry out such work and have said the company may be part
of an illicit revenue generating scheme. Arkenu has received crude valued at
$200mn under the proxy payment mechanism, a source said. Libya's Tripoli-based
government ordered a review of contracts related to Arkenu earlier this year,
although analysts question the sincerity of the move. Sources and analysts say
the use of proxy payments mechanism could spiral and further drain state
revenues. Libya produces about 1.4mn b/d of crude and makes most of its income
from oil exports, which were worth $28.7bn in 2024, according to Opec's latest
Annual Statistic Bulletin. The heads of NOC, the central bank, audit bureau and
the attorney general met in late November to discuss, among other issues, the
proxy payment mechanism "and its implications for the state's general budget."
By Aydin Calik Send comments and request more information at
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